1. The appeal arises out of an Order-in-Original No. S. 37 (Misc.-A)-1/90 A of the Collector, Calcutta.
2. The case of the appellants is that he is the proprietor of M/s. Shiv Shankar International and they have imported six million yds. of Zip Rolls of type CF No. 5 from DPR Korea origin from M/s. Greenland Textile Pvt. Ltd. One consignment of 7,60,000 yds. Zip Rolls was released after paying the customs duty vide Bill of Entry dated 6-9-1989. The balance of 4 consignments of Zip Rolls in 400 packages (8 lakh yds.), 400 packages (8 lakh yds.), 400 packages (8 lakh yds.) and 380 packages (7.60 lakh yds.) were shipped in the month of November,1989 vide Bill of Lading dated 7-11-89. Bills of Entry Nos.
1236 dated 20-11-89, 1654 and 1655 dated 28-11-89 and 1237 dated 20-11-89 were filed. Assessments were completed on Bills of Entry Nos.
1236 and 1237 on 23-11-89. The goods, however, were detained under Sec.
110 of the Customs Act. Aggrieved by the detention of the goods, the appellants approached the High Court for release of the goods. Finally, the matter went upto to the Supreme Court. The Supreme Court directed the Department to issue a show cause notice within a period of four weeks from 8-1-1990 and complete adjudication proceedings within a further period of three weeks. The appellants, again, moved the High Court of Calcutta and on 11-1-1990, the Calcutta High Court passed orders permitting the appellants to keep the goods in bonded warehouse under Sec. 49 of the Customs Act, 1962.
3. A show cause notice dated 2-2-1990 was issued to the appellants alleging, inter alia, that the country of origin certificate, issued by Korean Foreign Commodity Inspection Committee, Pyongyang, Korea are found to be incorrect, forged and manipulated and proposed to determine the assessable value of the goods on the basis of the value of goods of Japanese Origin or Taiwan Origin or South Korea Origin. It is also alleged that the duty difference for four Bills of Entry amounts to Rs. 1,24,62,949.53. The Import License produced for clearance of goods falls short of Rs. 64,10,969/-. The certificate issued by the Commercial Section, Embassy of Democratic Republic of Korea, Singapore on 19-12-89 stated that M/s. Greenland Textile Pvt. Ltd., Singapore have not imported any Zip Rolls of DPR Korea Origin from M/s. Korea Building Materials Export and Import Corporation that the goods are packed in plastic bags and not in normal export worthy packing, namely, carton, wooden boxes without showing particulars as to the trader's name, country of originate. The appellants filed a reply. Alongwith their reply, they filed Bill of Entry, invoice No. D/159 dated 7-11-1989, relevant packing lists, insurance policies, import licences and certificates of origin. It was also stated that these certificates of origin were furnished by the supplier, M/s. Greenland Textiles Pvt.
Ltd., Singapore stating that the country of origin of Zip Rolls type CF No. 5 is DPR Korea. These certificates Nos. are 128/89 dated 29-7-1989, 142/89 dated 18-8-1989, 151/89 dated 25-8-1989 and 152/89 dated 25-8-1989. They also produced the certificates of origin issued by Singapore Chinese Chamber of Commerce and Industry, Singapore. In addition, they have also relied on a letter dated 9-2-1990 issued by the Commercial Section, Embassy of Democratic Republic of Korea, New Delhi confirming the contents of the certificates referred to above and certifying that the certificates are true and correct.
4. On a consideration of the material before him the Collector enhanced the declared value for all the four consignments from US $ 2.28 per 100 yds. to US $ 5.97 per 100 yds and imposed various penalties. He also held that Rs. 20,45,303.30,value of goods, have been imported without the cover of valid import license and confiscated those goods. He also confiscated the remaining goods on the ground that the appellant mis-declared the value and imposed a redemption fine of Rs. 1,80,000/-.
In addition, a deterent penalty of Rs. 20,00,0007/- was imposed on the appellant on the ground that he is habitual offender.
5. The Collector, while enhancing the declared value and imposing various penalties, observed that the four certificates of origin, issued by Korean Foreign Commodity Inspection Committee to M/s.
Greenland Textile Pvt. Ltd. and produced by the appellants are forged.
In support of this finding, he relied on the letter dated 19-12-1989 issued by the Embassy of Korea at Singapore. He rejected the letter dated 19-2-1990 produced by the appellants relying on the letter dated 21-2-1990 of DRI faxing the letter dated 20-2-1990 of Commercial Section of DPR North Korea Embassy at Delhi stating that the letter dated 9-2-1990 is invalid. He also held that there is no direct evidence that the goods are of DPR Korea Origin. He observed that it is strange that in North Korea, a company dealing in building materials choose to export Zip Rolls to a trader in Singapore. The quantity covered in the four certificates does not tally with the quantity imported, which is a subject-matter of adjudication. He also observed that the goods do not bear any markings and numbers and, therefore, the goods cannot be related to the country of origin. He also relied on the admission made by the Counsel that on the basis of country of origin certificates, it is, not possible to relate the goods to the certificates. He, further, held that since the country of origin is proved to be incorrect, the value declared is incorrect. In the absence of clear evidence, as to the country from where the goods have been imported, he extended the lowest price of South Korean goods, i.e. Zip Rolls of South Korea origin. He enhanced the assessable value from 2.28 US $ to 5.97 US $ per 100 yds.
6. Challenging the above order, the appellants contended that the Collector rejected the certificates of origin on the ground that these are forged, relying on the letter dated 19-12-1989 issued by the Embassy of DPR Korea Commercial Section. This letter is not addressed to the Revenue Authorities of India. The Collector proceeded on the assumption that letter dated 19-12-1989 was issued to the DRI. The Collector has not adduced any evidence in support of the findings that these certificates of origin are forged. The burden of proof that the certificates are forged, is on the appellants and no evidence is adduced in support of the same. The Collector has not made any enquiry as to whether the certificates of origin are forged. The burden that the invoice value is not the correct value, is on the respondent, which was not discharged. There is no evidence of contemporary imports. The imports from South Korea cannot be treated as a comparable imports.
Therefore, he submitted that the invoice value should be accepted.
7. Shri Singh, appearing on behalf of the respondent, while reiterating the order of the Collector, admitted that the letter dated 19-12-1989 was not issued to the DRI, He also submitted that the transaction is fishy as Zip Rolls are imported in polythene bags without any marking.
It could not be that that the goods could have been unpacked in Singapore and packed again in Singapore to be imported to India. The appellants should have given the Bill of Entry evidencing the import from DPR Korea to Singapore.
8. After concluding the arguments, we directed Shri S.P. Singh, D.R., to file two copies of letter dated 15-2-1990, referred to by the Collector in his order. Shri S.P.Singh, alongwith the copies of the said letter, filed the following documents: 1. Certificates of origin No.128/89 dated 29-7-1989 No.142/89 dated 18-8-1989, 151/89 dated 25-8-1989 and 152/89 dated 25-8-89, purported to have been issued by the Korean Foreign Commodity Inspection Committee, Pyongyang, Korea in respcet of export of Zip Rolls by M/s. Korea Building Materials Exp & Imp. Corp. to M/s.
Greenland Textiles Pvt. Ltd., Singapore.
2. Certificates dated 25-9-1989 and 19-12-1989 issued by the Commercial Section of the Embassy of the DPR Korea, Singapore.
3. Letters dated 9-2-1990 and 20-2-1990 issued by the Commercial Section of the Embassy of the DPR Korea, New Delhi addressed to M/s.
Shiv Shankar International, Calcutta.
4. The Dte's letter of even number dated 14-2-1990 addressed to the Commercial Section of the Embassy of the DPR Korea, New Delhi and their reply bearing No. 4/90 dated 15-2-1990 and No. 214 dated 20-2-1990.
9. On receiving the documents, we heard both the parties. Shri Singh, in support of his contention that the certificates of origin were forged, relied on the endorsement made on these certificates which reads as under: 10. He also produced the reply dated 20-2-1990 and the letter dated 20-2-1990 to the D.R.I.11. Rebutting the arguments of Shri Singh, Shri Harbans Singh, Ld.
Advocate submitted that the endorsement made on certificates of origin produced now before this Tribunal cannot be relied upon as there is no reference to the name, who is competent to make the endorsement and no seal and no stamp. From this endorsement, he submitted, it cannot be ascertained whether he is authorised to certify and the source from which the endorsement emanates. Therefore, he submitted that the department has not proved that the certificates of origin are forged.
Shri Harbans Singh also submitted that the Collector's order cannot be justified on the ground that he has adopted the lowest price in the absence of the nature and quality of goods.
i) whether the certificates of origin No. 128/89, 142/89, 151/89 and 152/89 issued by the Korean Foreign Commodity Inspection Committee are forged.
iii) if the certificates of origin cannot be relied upon, what should be the assessable value of the goods? 13. It is the Department's case that the certificates of origin are forged and incorrect and in support of their contention, they relied upon the letter dated 19-12-1989. They also produced four copies of certificates of origin with an endorsement "Seen. Found to be incorrect and forged". They also relied on a letter dated 20-2-1990 issued by the Commercial Section, Embassy of DPR Korea which reads as follows: "With reference to your letter No. 812/cp/1/90 dated 14th Feb., 1990, I would like to state that our letter dated 9-2-1990 issued in favour of M/s. Shiv Shankar International, Calcutta regarding verification of certificate of origin Nos. 128/89, 142/89, 151/89, 152/89 is invalid since it was issued and signed by a person who is not authorised to issue such a certificate.
In this connection, copy of our letter addressed to said party is also enclosed".
14. The above letter is written in reply to the letter dated 14-2-1990 by the Joint Director, D.R.I. seeking verification of the certificates Nos. 128/89, 142/89, 151/89 and 152/89 and also seeking authenticity of letter dated 9-2-1990.
15. From the above, the evidence, available in support of the case of the Department that the certificates of origin are forged, is the letter dated 19-12-1989 and the endorsements made on the certificates of origin and also the letter dated 20-2-1990 stating that the letter dated 9-2-1990 certifying that the certificates of origin are valid, is not issued by an authorised person. The letter dated 19-12-1989 reads as follows: "In connection with the importation of Zip Rolls/Fasteners of DPR Korea origin in India through Singapore exporters, the following particulars are certified by us.
It is ascertained that M/s. D & N Textile & General Exporters and M/s. Multimill Impex PTE Ltd., Singapore are the only authorised export representative of DPR Korean Zip Products. At present M/s.
Korea Namyang Trading Corporation are the only Agency in DPR Korea for export of Zip Products to other countries specially for East and South East Asia.
It is also ascertained that M/s. Greenland Textile Pte. Ltd., 1, North Brodge Road, 122-08, High Street, Singapore 0617 (Mailing address: Raffles City, P.O. Box 573, S'pore 9117) have not imported any Zip Rolls of DPR Korean origin from M/s. Korea Building Materials Exp. & Imp. Corpon. The certificates of Origin No. 128/89 dt. 29-7-1989, No. 142/89 dt. 18-8-1989, No. 151/89 dated 25-8-1989 and No. 152/89 dt. 25-8-1989, copies of which was shown to me. We were surprised to see the certificates of origin, as they were not issued by Korea Foreign Commodity Inspection Committee, Pyongyang.
As such the Zip Rolls were not of DPR Korea origin, claimed by M/s.
Greenland Textile Pte. Ltd., Singapore. The said Certificates of Origin were not issued by Korean Foreign Commodity Inspection Committee in favour of M/s. Korea Building Materials Exp. & Imp.
Corp. for export of Zip Rolls to M/s. Greenland Textile Pte. Ltd., Singapore. They were found to be incorrect and forged." 16. There is no evidence as to how the Department has obtained the possession of the letter dated 19-12-1989. It is admitted by the D.R.that from the document, it cannot be inferred that the letter is addressed to the Department. The Collector has also not referred to any evidence as to how he has obtained possession of the letter dated 19-12-1989 which categorically stated that the relevant certificates of origin are forged and incorrect. Similarly, the endorsement made on these certificates of origin is not clear. The Department has not adduced any evidence as to who made the said endorsement "Seen. Found to be incorrect and forged". There is no authentication stamp/seal of the person authorised to verify and certify. The evidence adduced by the Department to prove that the certificates of origin are forged does not lead to the said inference. Therefore, we are of the view that the Department failed to prove that the certificates of origin are incorrect or forged.
17. The next question is whether the certificates of origin can be relied upon. In support of their contention that the certificates of origin are genuine, the appellants relied upon a letter dated 9-2-1990 written by the Commercial Section, Embassy of DPR Korea, which reads as under: "We acknowledge the receipt of above mentioned certificate of origin in original.
We hereby confirm and certify that the certificate of origin Nos.
128/89 dated 29-7-1989, 142/89 dated 18-8-1989, 151/89 dated 25-8-1989 and 152/89 dated 25-8-1989 have been issued by the Korean Foreign Commodity Inspection Committee, Pyongyang, D.P.R. Korea.
We also confirm that the contents of the above mentioned certificate is true and correct".
18. On 14-2-1990, the Joint Director, D.R.I. wrote to the Commercial Section, Embassy of DPR Korea enquirying whether the certificates of origin are genuine and whether the letter dated 9-2-1990, issued by the Commercial Section, Embassy of DPR Korea is written by an authorised person. In reply to them, the Commercial Section, Embassy of DPR Korea, categorically stated that the letter dated 9-2-1990 issued in favour of Shiv Shankar International Calcutta regarding verification of certificate of origin Nos. 128/89, 142/89, 151/89 and 152/89 is invalid since it was issued and signed by a person who is not authorised to issue such a certificate. Therefore, the certificates of origin cannot be accepted as genuine and appellants have not produced any convincing evidence in support of their case. They have not adduced any evidence showing that the Korean Foreign Commodity Inspection Committee is the competent authority to issue such a certificate. They have also not adduced any evidence as to how Korean Building Materials Exp. & Imp.
Corporation exported the goods, in question, to Greenland Textile Pvt.
Ltd., Singapore. The No. of Bills of Entry, by which the goods were exported by DPR to Singapore, were also not available. In the light of above, the certificates of origin cannot be accepted.
19. Since the certificates of origin are not genuine, we cannot ascertain the country of origin from which the goods are imported.
Therefore, we are of the view that the goods are not imported from DPR Korea.
20. The next question is what should be the assessable value as the country of origin from which the goods are imported, is not ascertainable.
21. Section 14 provides for the determination of the assessable value which reads as under: "14. Valuation of goods for purposes of assessment. - (1) For the purposes of the (Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force whereunder a duty of customs is chargeable on any goods by reference to their value, the value of such goods shall be deemed to be - (a) the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation or exportation, as the case may be, in the course of international trade, where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale: (b) where such price is not ascertainable, the nearest ascertainable equivalent thereof determined in accordance with the rules made in this behalf.
22. The adjudicating authority in the show cause notice referred to the contemporary imports from Japan, South Korea and Taiwan. However, in the adjudication order, he relied upon the price of import from South Korea on the ground that these are the lowest prices and enhanced the value to US $ 5.97. Since the country of origin is not known the imports from Japan, Taiwan and South Korea, cannot be treated as 'such' or 'like goods' ordinarily sold at the place and time of importation in the course of International Trade as the quality of the goods imported from these three countries is not known and that these are not the countries from which the impugned imports are made. Therefore, the prices cannot be ascertained under Section 14(l) (a) of the Act. The Collector relied upon the value of imports from South Korea in determining the assessable value. There is no material before us to show that the impugned goods are comparable in quality with those of South Korea. Therefore, he could not have adopted the value of goods imported from South Korea. At internal page-14 of the show cause notice it is stated that "the price of the subject goods should be ascertained on the basis of value of the goods of Japanese origin or Taiwan origin or South Korean origin". In paragraph-16 of the impugned order-in-original the Collector has observed, "In effect, if it is proved that the goods are of North Korean origin, the Department may have to accept the low price of U.S. $ 2.28 per 100 yards. However, if it is conclusively proved that the goods are not of North Korean origin, then the prices declared are definitely low and should be revised". In paragraph - 19 of the order he has observed, "Thus, there is no clear direct evidence of the country of origin for the goods presently covered by the adjudication. It is only an indirect evidence that the goods have been imported from North Korea." In paragraph - 20 of the order he has stated that "no evidence has been adduced to conclusively prove from what country, these goods have been imported except that these have not come from North Korea." He has further observed in the said para that the "Department has also not succeeded in giving clear indication as to the prices to be adopted in this regard." He has held that "Since the value in respect of the entire 4 consignments in question has been misdeclared, the same is also liable to confiscation under Section lll(m) of the Customs Act, 1962". The above extracts from the impugned order show that the Department was not sure about the correct country of origin of the impugned goods and the Department was also not sure as to what should be the correct price of the goods. That is why it was alleged in the show cause notice that the price should be determined on the basis of the value of the goods of Japanese origin or Taiwan origin or South Korean origin. Further, there is no allegation in the show cause notice that the impugned goods are comparable in quality with the goods of Japanese or Taiwan or South Korean origin, nor has the Collector given any such finding in his order. He has also not stated under which clause of Section 14 of the Customs Act or under which Rule of the Valuation Rules he has determined the value for the assessment. The next provision applicable is Section 14(l)(b) according to which the price should be ascertained in accordance with Rules. The relevant rules are Customs Valuation (Determination of Price of Imported Goods) Rules, 1988. The relevant rules read as follows: "3. Determination of the method of valuation.- For the purpose of these rules, (ii) if the value cannot be determined under the provisions of Clause (i) above, the value shall be determined by proceeding sequentially through Rules 5 to 8 of these rules.
4. Transaction value. - (1) The transaction value of imported goods shall be the price actually paid or payable for the goods when sold for export to India, adjusted in accordance with the provisions of Rule 9 of these rules.
(2) The transaction value of imported goods under sub-rule (1) above shall be accepted." From the above rules it is clear that Rule 3 provides for the method of valuation. Under Clause (i) of Rule 3 the value of imported goods shall be 'transaction value'. Transaction value' is defined under Rule 2(f).
It says 'transaction value' means the value determined in accordance with Rule 4 of these Rules. According to Rule 4 transaction value of imported goods shall be the price actually paid or payable for the goods when sold, and it also says that the 'transaction value' shall be accepted. Therefore, if the transaction value is available i.e. the price actually paid or payable is available then the assessable value shall be determined by accepting the price actually paid or payable unless it is found to be not genuine. Since there is no evidence of contemporary imports of comparable goods at higher rate and since there is no evidence that the appellants have remitted to the supplier any amount clandestinely more than the amount they have actually paid, 'transaction value' under Rule 4 is available, and therefore, it has to be accepted.
23. In this case Rules 5 & 6 are not applicable as Rules 5 and 6 deal with the 'transaction value' of 'identical goods' and 'similar goods' respectively. The expression 'identical goods' is defined under Rule 2(1)(c) which is as follows: "2. Definitions. - (1) In these rules, unless the context otherwise requires. - (i) which are same in all respects, including physical characteristics, quality and reputation as the goods being valued except for minor differences in appearance that do not affect the value of the goods; (ii) produced in the country in which the goods being valued were produced; and (iii) produced by the same person who produced the goods or where no such goods are available, goods produced by different person...." The expression 'similar goods' is defined under Rule 2(e) which reads as follows:- (i) which although not alike in all respects, have like characteristics and like component materials which enable them to perform the same functions and to be commercially interchangeable with the goods being valued having regard to the quality, reputation and the existence of trade mark; (ii) produced in the country in which the goods being valued were produced; and (iii) produced by the same person who produced the goods being valued, or where no such goods are available, goods produced by a different person." 24. The impugned imports cannot be treated as identical or similar to the goods imported from Japan, South Korea or Taiwan as the criteria laid down in the definition of identical goods or similar goods under Rule 2(1)(c) and (e) are satisfied, and there is no other evidence of the value of identical or similar goods. We, therefore, hold that the value of goods shall be determined by adopting the transaction value under Rule 4 of the Rules, i.e. actual price paid by the appellants to the supplier.
25. In view of the foregoing we allow the appeal and set aside the order of the Collector.